a. Prepare a comparative income statement with horizontal analysis, indicating the increase (decrease) for the current year when compared with the previous year. If required, round to one decimal place.

a. Prepare a comparative income statement with horizontal analysis, indicating the increase (decrease) for the current year when compared with the previous year. If required, round to one decimal place.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

## Horizontal Analysis of the Income Statement

**Income statement data for Winthrop Company for two recent years ended December 31 are as follows:**

| | Current Year | Previous Year |
|--------------------------|--------------|--------------------|
| Sales | $2,280,000 | $2,000,000 |
| Cost of merchandise sold | $1,960,000 | $1,750,000 |
| Gross profit | $320,000 | $250,000 |
| Selling expenses | $156,500 | $125,000 |
| Administrative expenses | $122,000 | $100,000 |
| Total operating expenses | $278,500 | $225,000 |
| Income before income tax | $41,500 | $25,000 |
| Income tax expenses | $16,600 | $10,000 |
| Net income | $24,900 | $15,000 |

**Tasks:**

a. **Prepare a comparative income statement with horizontal analysis, indicating the increase (decrease) for the current year when compared with the previous year. If required, round to one decimal place.**

### Winthrop Company
**Comparative Income Statement for the Years Ended December 31**

| | Current Year Amount | Previous Year Amount | Increase (Decrease) Amount | Increase (Decrease) Percent |
|--------------------------------------|---------------------|----------------------|---------------------------|-----------------------------|
| Sales | $2,280,000 | $2,000,000 | | |
| Cost of merchandise sold | $1,960,000 | $1,750,000 | | |
| Gross profit | $320,000 | $250,000 | | |
| Selling expenses | $156,500 | $125,000 | | |
| Administrative expenses | $122,000 | $100,000 | | |
| Total operating expenses | $278,500 | $225,000 | | |
| Income before income tax expense | $41,500 | $25,000 | | |
| Income tax expense | $16,600 | $10,000 | | |
| Net income

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